Wednesday, July 29, 2015

Yes, you read that right. This has just come out. Front page story. Not only has his life been threatened, but the story also has threatened the lives of his wife, economist Yekaterina Zhuravskaya, and their two children.

For those who do not know who he is, Guriev was the Rector of the New Economic School in Moscow until over a years ago when he was pressured to resign and left Moscow for Paris, where his wife and family have been. Zhuravskaya and Guriev have been visting at Sciences Po.

The immediate cause of this outburst was a speech Guriev gave recently in London denouncing the invasion and annexation of Crimea by Russia. The article stated that this speech "put him and his family in danger." Really. This is what things have descended to.

Oh yes, the article says more. It contains a more general denunciation of him, claiming that his PhD was written by ghosts and that everything he did was funded by US agencies. It is a full court press.

I shall further note that I know Sergei personally, and that I published a paper by him when I was editing JEBO. He has a long and impressive vita, and these accusations are like the worst of the old Soviet Union, completely unacceptable.

I wish him and his family all the best in this very dangerous situation.

The release and publicizing of doctored videos of Planned Parenthood people talking about selling and distributing and accesing of organs from aborted fetuses has been turned into a new rampage by the anti-free-choice crowd to both defund Planned Parenthood, which provides many clearly useful health services beyond abortion, and also to energize presidential candidates trying to hustle their way into the hearts of all those Iowa and other evangelicals, who are somehow under the delusion that the Bible calls abortion, "murder," which it most certainly does not.

What is a bit more disturbing is that the general media seems to be not only letting these candidates and politicians get away with calling aborted fetuses, "murdered babies," but that some of them are beginning to repeat this formulation as if it were simply a fact (although usually without the "murdered" in front). Those awful people at Planned Parenthood are selling organs from aborted "babies." This is certainly a dangerous trend and would constitute a complete redefining of words.

If the general media falls for this and gets this established, it will be like the succes story the organized right pulled when it got the media to talk about "death taxes" without any irony or explanation or modification, rather than as "estate taxes." I mean, who can support "death taxes"?

So, let us be clear: a fetus is not a baby. Go look in any dictionary. A baby must be born live to become a "baby." Prior to birth, it is a fetus after 8 weeks, it is a "fetus." In the first 8 weeks it is an "embryo," although very early on after conception it is a "zygote," not sure what the official cutoff for that one is. But, there are plenty out there who think that aborting them is murder.

So, I am going to go into waters rarely swam in here on Econospeak, and I am not going to provide a bunch of precise quotes. I am simply going to cite sources, giving the main arguments. From a theological perspective, what is involved for most who argue about this is the time of "ensoulment." (If you do not believe in souls, fine, figure out your own argument on this and why you think what you think about the broader issue, keeping in mind, is infanticide OK with you? Personally am agnostic on all this soul stuff)

So, there is a wide range of views about this issue among both philosophers and theologians, with most starting at Aristotle, who thought it was 40 days for male embryos, and 89 days for female fetuses (sexist pig!) after conception. The range of views on this is simply enormous and wide. Some Hindus (and some Buddhists) insist on the preexistence of the soul because of reincarnation, but wide differences and debates show up about when it enters, ranging from conception to birth and the taking of the first breath. Some have argued that enters when the penis enters the woman's body to impregnate (really! although that one is definitely a rare view). Many think it is at conceoption, with this the official doctrine of the Roman Catholic Church for most of its history, except during a period in the middle ages when Aristotle's view was accepted. Some say it is 40 or 80 or somewhere between 40 and 120 (a widely held view in Islam) days after conception. One that had much sway in English common law was when "quickening" happnes, when the fetus first starts moving and can be felt (usually around 18-20 weeks in), with this showing up in Blackstone and in case law regarding when one can execute a convicted pregnant woman (yes before quickening, no afterwards). Then there is "viability," can it survive outside the womb, with the 50% cutoff on that being more like 24 weeks into pregnancy. Then there are many (and when I believe in souls, this is what I think is most likely), at birth with the taking of the first breath, with many from many traditions taking this view. Finally, at the furthest extreme have been some Jewish rabbis who have argued that the soul does not enter until a young child first says "amen."

Given that what people who support fully free choice regarding abortion, with the big dividing line being at birth, when a fetus becomes a baby (oh, and of course some of those ancient Greek philosophers thought that infanticide was acceptable under certain circumstances, something that I do not accept), let me make the case for that. There are many passages in the Bible that support it, including in Genesis, Psalms, Job, and Ezekial, at a minimum. These all involve God "breathing life" into people and thus providing them with spirit. I note that the world "spirit" is tied to "inspire," which is also tied to breathing (and in Sansrkit, "atman," which is oversoul is linked to "atmosphere," or air). There are numerous theologians and philosophers in various traditions who hold to some variant of this remark, and people who insist on saying that abortion before birth is "murder" are violating their religious freedom.

Finally, one further odd item, which is from Exodus, the only passage that arguably comes the closest to dealing specifically about the nature of the fetus as a being. It discusses the punishment for a man who physically attacks a woman and causes a miscarriage, granted not the same as an intentional abortion, but in my mind at least a lot worse. The punishment is that he is to pay a fine to the husband's family. Many Protestant fundamentalists have cooked up translationis that try to change this, but most Hebrew scholars insist that this is what it says. This is in a part of the Bible that is very hard line about all kinds of things, with the famous passage about "an eye for an eye" very nearby this one. Not all that far away we have people supposedly being needed to be stoned to death for not only murder, which clearly this induced miscarraige is not (thus clearly implying that the fetus is not a fully ensouled human baby), but for such ephemera as being a disobedient child, being a women getting married who is not a virgin, and being a married couple who have sex during the wife's period, not to mention homosexuality, of course. All of those are worse than inducing a miscarriage in a pregnant woman by physically attacking her. Really.

Additional Remarks:

For those who do not believe in souls, or really do not know what to think, of course we can note that indeed there is this gradual increase in development as various body parts, organs, activities within the fetus, and so forth increase as pregnancy proceeds, with public opinion, whatever is driving the various parts of it gradually shifting from a more solidly pro-free-choice position in the early stages to much less of such a position, especially one gets to the third trimester. I certainly recognize this moral gradient that things get more and more questionable the later one proceeds into pregnancy, and I must grant that most nations do put at least some sorts of restrictions on late term abortions, even if they do not outright outlaw them. I do happen to support free choice in that final trimester, while recognizing that it is a hard choice. I simply note that because it is, and would-be mothers themselves are aware of all this, that the number of late term abortions is very low, and most of them involve very unusual circumstances that should be decided upon by the pregnant woman and her doctor. So, I still support free choice, even in that morally more difficult time.

I also certainly grant that the videos look awful. But so then do all those posters of aborted fetuses that show up on roadside posters here and there. It is important to remember that these organs are being used for scientific research that can potentially help living people who have been actually born, and that this use of those organs has been approved by the would-have-been mothers, or so I understand anyway. That the actual process is ugly, well, so are many other things that we live with and accept, or at least most of us, although we do not want to see them directly or even on videos..

Friday, July 24, 2015

So, WTI oil has slid below$49 per barrel; gold has gone below $1100, although it jumped today. The US stock markets have been down in recent days for no obvious reasons, and some others are not looking so hot either. Is there a common thread? The big Greece crisis is over, although that could yet blow up, although I think most markets already know about that.

There have been lots of rumbling that problems in China might have something to do with all that. There is no way to know this for sure, especially given China's long record of manipulating data. Furthermore, serious observers are dismissing all this as a bunch of bad hype, most notably Dean Baker recently, accurately dumping on an incompetent story out of the NYTimes (who seem to be pretending that they were secretly bought by Rupert Murdoch lately). The Times had a story about the decline of the Chinese stock market, making a big deal about it. Dean accurately noted that it is still above where it was in February, so the NYT looks pretty silly making such a big deal about it, especially since the Chinese stock market seems to have stabilized, as have the housing markets in Shanghai and Beijing, even if it is still falling in a lot of lower tier cities.

I have tried to link to a report from just over a week ago by Pete Wargent, an Australian with an accounting background who reports from investing.com, but it did not work. So, I am just going to lay out a bunch of reported data from a bunch of sources that suggests that while Dean is right about the NYTimes story, things are going on in China that are negatively affecting the world economy and are not being reflected in more aggregated statistics. One reason I wanted to link to Wargent was not just his immediate report that capital flight from China has been steadily soaring, probably at least quadrupling from about two years ago, he linked to an older report laying out how the Chinese government messes with its GDP accounts, pointing out foreign trade data as one area where things get misreported. He snarkily noted that China had just reported that the most recent quarterly growth report was at 7%, just what the government had forecast, but...

So, what he noted is that while these aggregate number can say one thing, looking at more micro data can tell very different stories. Here are some numbers, each taken from a different source:

1. In March, electrical power production (from all sources) was down 2% from a year before.
2. In May, oil imports were down 11% from a year before.
3. Truck sales have fallen by nearly a half between last year and now.
4. Capital flight numbers are accelerating, possibly more dramatically than the quadrupling figure reported by Wargent.

So, maybe these are consistent with an aggregate 7% growth rate, but does not look like it. Many outside observers are arguing that the Chinese GDP growth rate is more like 4%, with some saying that in the first quarter it hit zero or even lower, although picking up more recently.

A final point regards the stock market bubble story. While Dean Baker sneered at the story from the NYTimes, an aspect not reported by them or him, but in Wargent reports and some other sources says that the methods used by the Chinese government in its efforts to halt the stock market slide (so far successful) were very extreme, including simply forbidding many stocks from being sold, and also forcibly confining stock dealers in rooms until they engaged in purchasing some stocks, with portions of the market still shut down with no transactions allowed. So, the stock market is not at all really stabilized. We are seeing the ugly side of the old Chinese system, trying to keep a lot of problems under control that they have not had to deal with.

Anyway, declines in oil purchases by them and rumors that the Chinese have guaranteed a gold price floor of $1000, well, I guess we do not know what is really going on with any of this, whether or not declines in these and other markets are really due to a bigger slide in the Chinese economy than is being officially reported at the aggregate level, this cannot be ruled out. But, I think there is reason to be concerned.

Wednesday, July 22, 2015

The first mention of the lump-of-labor fallacy I ever encountered was in a 1997 column by Jock Finlayson, vice president for policy and analysis of the B.C. Business Council. It was a Business in Vancouver debate with Ken Georgetti, president of the B.C. Federation of Labour, on the merits of restricting overtime to combat unemployment.

At the time, I had been active in advocacy for shorter working time for a little over two years. An abiding interest in the idea had been stoked in 1995 when I wrote a research proposal to do a narrative policy analysis of the employment prospects of work time reduction. Funding for the project never materialized in the wake of a comprehensive provincial government spending freeze announced three weeks after the proposal submission deadline. Meanwhile, however, I had established a web site, the Timework Web, to compile research and commentary on shorter working time.

A little past the midway point in his column, Finlayson wrote, "Work-sharing rests on the belief that the economy can generate only a fixed amount of work. History provides little support for this gloomy view, which economists have labelled the lump-of-labour fallacy." The passage caught my attention because of its distinctive "ungrammaticality," to use Michael Riffaterre's clumsy term.

Riffaterre used that term in a generic sense to refer to "any wording unacceptable in context" rather than exclusively to overt violations of the rules of grammar.
These clumsy wordings, in Riffaterre's analysis, point to the text's intertextuality, "The text refers not to objects outside of itself, but to an intertext. The words of the text signify not by referring to things, but by presupposing other texts."

For narrative policy analysis, such peculiarities of wording are not mistakes to be indulged but "jackpots" for decoding a text. The challenge then becomes one of retrieving the corpus of texts – the "intertext" – to which the peculiar passage refers. The archival work to do so would have been inconceivable before the Internet and wide availability of full-text searching of databases of journal articles, pamphlets and treatises.

Finlayson probably learned about the lump-of-labour fallacy from Paul Samuelson's ubiquitous introductory economics textbook. But Samuelson didn't know when or where the fallacy claim originated, explaining that the fallacy "was widespread during the Great Depression 1929-1935 and is still encountered in today's France." (correspondence with the author).

Using JSTOR, I was eventually able to trace the "lump of labour" phrase to an 1891 article on piece work by David Frederick Schloss. By then, January 1999, I was already aware that the fallacy claim -- and rebuttals of it -- had long preceded that specific label. It took me 15 more years of occasional forays back into the archives (and keeping my eyes peeled) before I finally got to what I believe is the rock bottom of the story.

Tuesday, July 21, 2015

Fears of mass technological unemployment are predicated on a “lump of labor” model of the economy—the belief the economy needs a roughly fixed amount of work performed.In this economic model, machines automating work formerly done by people reduce the total amount of work remaining for humans, reducing total employment. Keynes forecast an impending crisis of unwanted leisure. He suggested future societies would establish three-hour workdays to give everyone enough work to avoid boredom.

Almost all economists reject this model today. Economists have found that an almost unlimited amount of potential work exists in the economy because people’s material desires continue to expand. Virtually all Americans today enjoy material living standards vastly better than the wealthy of 1900. Nonetheless, most Americans today would purchase additional goods and services if they received a raise or bonus.

Jeb! apparently thinks the U.S. needs spending cuts in order to get a balanced Federal budget, which sort of sounds like what Merkel has been insisting in terms of fiscal policy for the “Club Med” nations. I was wondering where this hate filled term came from and in my search I found this.

German media reported earlier this week that Chancellor Angela Merkel told CDU party supporters that workers in southern European countries must work more.

The Jeb! solution for those with modest incomes in the U.S. seems to be that they should work more. Of course, the Greeks and Americans do tend to work a lot when they have jobs. Of course the fiscal austerity that Merkel and Jeb! advocate makes finding a job that much harder.

That is the heading the Washington Post put on the letter by me that appears today, July 21, 2015, on their editorial page. What follows is the letter itself verbatim.

"The July 17 letter from Bandar bin Sultan bin Abdulaziz al Saud, "The Iran deal hurts U.S. allies," implied that it was the Clinton administration's 1994 agreement with North Korea that led to North Korea obtaining nuclear weapons. That agreement caused it to adhere to the Nuclear Non-Proliferation Treaty, shutting down its plutonium-producing reactor and halting it nuclear weapons program. Those actions were undone, with North Korea obtaining nuclear weapons, after March 2001, when the George W. Bush administration changed course and increased sanctions in a failed effort to bring about the end of the North Korean regime."

Monday, July 20, 2015

Ruling out any writeoff of Greece’s debts, Angela Merkel is quoted today as saying “A classic haircut of 30, 40 percent of debt cannot happen in a currency union....” This echoes what Wolfgang Schäuble said last week: “....everyone knows that a debt haircut is incompatible with membership in the monetary union.”

OK, let’s take a moment with this. The United States is a currency union: fifty states with all their urban and regional subdivisions share a common currency, the US dollar. Are public debts of these subjurisdictions ever written down? Regularly. Orange County, anyone? Detroit? What law of nature or human affairs is supposed to make this impossible?

As a general proposition, the Merkel-Schäuble doctrine is obviously, indefensibly wrong. You’d think someone would call them on it.

So maybe the no-haircut rule is wrong in general but does apply to the eurozone. You could argue that writing down Greek debt reduces Germany’s assets as it decreases Greece’s liabilities and therefore constitutes the sort of transfer that the zone was carefully crafted to avoid. The problem is that this overlooks the fact that Greek debt is already worth less because the markets have correctly divined that it cannot be fully repaid. This is clear if you think of the mechanism by which a writedown would normally be executed: the existing stock of debt (or the portion of it drawn on a particular creditor) would be exchanged for a new bundle of instruments with lower face value but approximately the same market value. Such a transaction acknowledges and ratifies a loss in creditor value that has already occurred. Now, if you want to interpret the EU rules as forbidding the market to devalue the assets of creditors and the liabilities of borrowers because that constitutes a transfer—well, good luck.

So on closer analysis the German position is as absurd as it looks on the surface. It is a weak play for intellectual legitimacy. What it’s really about, of course, is the fact that Greek maturities are spread out over the coming decades, and that restructuring their terms will postpone the reality of default to future politicians. A writedown is immediate and pins the loss on the folks currently in control. And you can’t have that in a currency union, can you?

Friday, July 17, 2015

"...our understanding of wage determination has been transformed by an intellectual revolution... workers are people" -- Paul Krugman

Memo to Karl Marx, suggested revision -- highlighted in yellow -- to the climax of your 1865 address to the First International (courtesy of Paul Krugman):

"Instead of the conservative motto: 'A fair day's wage for a fair day's work!' they ought to inscribe on their banner the intellectualrevolutionary watchword: 'Abolition of the wages systemWorkers are people!'"

Where to begin?

Even prior to Card and Krueger's pathbreaking research on the minimum wage there were widespread intimations that workers might indeed be people. Reputedly, the Fair Labor Standards Act of 1938 -- which established a federal minimum wage in the U.S. -- was enacted into law more than a half century before the intellectual revolution that transformed our understanding of wage determination. How did that happen? It's like they must have had a time machine or something.

But are workers actually people? A balanced analysis would present both sides of the question objectively.

"That's you problem right there, ma'am. Your denominator is all
wore out and that's puttin' too much strain on your numerator."

If U.S. policy makers and the public take away only one key lesson from what’s happening in Europe right now, it should be to put the budget on a path to balance during good times such as these.

Paul may a few good points but permit me to go further starting with this opening line. As Paul and others have noted, this call for fiscal austerity risks another recession which is the real lesson we should be drawing from the Greek tragedy. The toxic mix of fixed exchange rates and fiscal austerity has plunged Greece into a massive recession which is the main reason its debt/GDP ratio keeps rising. But the folks at the Heritage Foundation would not ask us to adopt some sort of gold bug philosophy – would they?

the United States also creates its own money, enabling it to devalue its currency and debt to avoid defaulting on payments for a lack of cash. This power, when abused, can lead to steep inflation setting off very bad economic consequences that can harm those relying on their savings to get by the most.

While this acknowledges the beneficial role of devaluation, it immediately goes into inflationista mode suggesting the folks at Heritage are indeed still gold bugs. But what bothers me most is this reliance on some this IMF report:

lessons from nine country case studies on how changes in fiscal policy coupled with structural economic reforms, such as labor-market liberalization, drive increases in economic growth.

Read the IMF report for yourself but I’m not convinced that this report makes a strong case for supply-side economics. Yet the folks at Heritage argue:

Growing spending on public benefits threatens to overwhelm the U.S. economy in the long term. At the federal level, Social Security, Medicare, Medicaid and other health programs consume more than half of the budget, and spending on these programs is growing steeply. After accounting for other benefits, transfer payments make up about 70 percent of all spending in the United States today. Implementing important reforms to unaffordable and outdated benefit programs has proved to be a difficult feat politically. However, waiting too long on reforms diminishes the ability to phase in major changes gradually, in a way that will protect those who rely on benefits the most and leave others time to adjust to new fiscal realities. Waiting for a major crisis to force reforms, as Greece has done, brings unnecessarily painful austerity.

Let’s be clear – reforms and austerity are two very different things. And yet the real agenda here is to reduce Federal spending on health care and Social Security, which will likely be neither reform nor austerity if these spending reductions are nothing more than means to pay for more tax cuts for the rich.

Thursday, July 16, 2015

So claim the Saudis in announcing their joining Israel in opposing the new Iran nuclear deal negotiated by the P5+1 with Iran. Why do the Saudis make such a claim? They have argued that Clinton engaged in a soft policy that led to North Korea obtaining nuclear weapons. This agreement with Iran is supposedly like what Clinton did in the 90s with North Korea, so accepting the deal will lead to Iran obtaining nuclear weapons also, presumably unless somebody goes and bombs, bombs, bombs Iran, as John McCain used to put it. Is there any basis for this argument?

No.

What led to North Korea getting nuclear weapons has rarely been discussed in the US media, and is not at all now. I am not surprised that the Saudis are confused about this, as I suspect the vast majority of Americans have no idea with what really happened. It has barely been reported. As it is, this was the second worst foreign policy disaster of the George W. Bush administration, with only the invasion of Iraq. Unsurprisingly, those pushing the invasion of Iraq (and now pushing bombing Iran) were those who were behind this Korean fiasco.

After North Korea's founder, Kim Il Sung, died in 1994, relations between the two Koreas relaxed, especially following a visit to Pyongyang by Jimmy Carter. South Korean President Kim Dae Jung began his "Sunshine Policy," indeed supported by the Clinton administration. One of the things to come out of this was North Korea joining the NNPT (Nuclear Non-Proliferation Treaty) and shutting down its plutonium producing facility, effectively shutting down its developing nuclear weapons program. Kim Dae Jung would receive a Nobel Peace Prize in 2000 for his policy. I note he was a genuine reformer who had been a dissident during the Park Chung Hee dictatorship (1960-1979) and was tortured by that regime so that he always had a major limp until his death in 2009. He was actually saved from execution during this period by the US CIA.

When George W. Bush became US president in January, 2001, his Secretary of State, Colin Powell, thought that continuing the US policy supporting the ongoing negotiations was the proper thing to do and communicated this to President Kim. Kim came to Washington in early March after that to meet with Bush with this expectation in his mind. But upon arriving, he learned that Cheney and Rumsfeld had gotten to Bush to undo Powell's approach. They believed that North Korea was on the verge of collapse (they got such views from Nicholas Eberstadt, among others), so that tightening sanctions would push them over the edge and regime change would result. Kim Dae Jung returned furious to Seoul, and US popularity in South Korea tumbled sharply. The Sunshine Policy came to an end.

Needless to say, what followed in North Korea was not a collapse, but a withdrawal from the NNPT, a restarting of the plutonium reactor, and the production and acquisition and testing of nuclear weapons. It was not Clinton's policy that led to this outcome, it was Bush's, following an approach that the Saudis seem to think should be applied to Iran. Really, I do not think they know what they are advocating there, this is so incredibly stupid. The loss of their longtime foreign minister, Saud al Faisal recently, is really showing.

I met George Papandreou a couple of times at conferences and had brief conversations with him. He always seemed like a reasonable and serious guy. This was all before he became Greece's Prime Minister in October, 2009, but after he became leader of the Greek PASOK party in 2004, the old socialist party of Greece, which his father and grandfather had led, with both of them serving as PMs also. George's father, Andreas, was an economist and was on the Berkeley faculty for some period of time and married an American woman, George's mother. George served as a minister of education and some other positions when his father was PM during the 1980s and 1990s. While PASOK is dead, and George's effort to start a new party and run in the most recent election totally failed, he continues to serve as president of the Socialist International, a position he has held since 2006.

The most dramatic thing that he did came shortly after he became PM in late 2009: he revealed that Greece had been lying about its national income accounts and particularly its budget deficits. These had been claimed by the previous administration to be around 6% of GDP, but were actually nearly 13% of GDP. George fessed up to this, which was the trigger for what would be called the "eurocrisis," and which went on for several years, basically until the ECB announced that they would "do what is necessary" to back up sovereign debt in the eurozone, bringing down interest rates in nearly all nations in the zone, although not in Greece.

This admission and crisis led to the original bailout of the Greek financial system, with all that austerity imposed for financial support. That deal was unsustainable, and their would be a readjustment in 2012, which was also unsustainable, with all the more recent stuff arising due to that.
So, socially and politically progressive Papandreou accepted imposition of an austerity program that tanked the Greek economy. His popularity steadily declined as it became clear how disastrous the agreement was, with him finally stepping down in late 2011 in favor of a unity government. As it is, while he remains highly respected abroad, and I have very high personal respect for him, his fall into unpopularity in Greece seems to have been total and probably permanent.

So, it looks like Alexis Tsipras seems to have followed his path. After lots of rhetoric and admirable efforts to get a better deal for Greece, he has in the end totally surrendered and caved to the demands of German Finance Minister Wolfgang Schauble and his allies in such countries as Finland and Slovakia. While there are funds being provided, if anything it looks like the austerity being imposed may well be worse than what went down before. I am not going to repeat how unfair and unreasoanble all this, other than to note the IMF declaring that this agreement is also unsustainable without debt restructuring, totally rejected by Schauble and his allies. To get this awful agreement through the Greek parliament, Tsipras had to rely on his opponents, with many Syriza members not supporting it, and major demonstrations going on outside, even though apparently a majority of Greeks oppose leaving the euro. I sympathize with Tsipras's position, but, I fear, he has just become the next George Papandreou. As it is, Yanis Varoufakis resigned after the referendum passed that was supposed to get the troika to back off, but failed to do so. We shall see how long it will be before Tsipras follows Papandreou out of office.

Pinch me. Are we actually having this conversation? Should morbidly obese Americans eat more doughnuts? I am fond of quoting Thomas Pynchon's epic line from Gravity's Rainbow, "If they can get you asking the wrong questions, they don't have to worry about answers."

Barro's column pursues the "balanced, objective" framing device of looking at "both sides" of a wrong question. Bruenig points out the flaw in Barro's central theme of regulatory and tax "distortions" that discourage even longer hours of work. Barro's framing ignores much greater and more fundamental distortions that impose longer hours. "If we are going to have a work debate," Bruenig concludes, "it should proceed by asking ourselves how much time we want to spend toiling our scarce lives away, not muttering incoherently about what distorts what."

Bruenig presents two charts that compare hours worked in the U.S. to other countries. The first chart plots the ratio of annual hours to labor productivity. The second chart compares each country's hours/productivity ratio to an aggregate norm. The U.S. is a long-hours outlier in both.

In plain language, what these charts reveal is the inordinate emphasis in the U.S. on GDP. In fourth-grade arithmetic terms, the index called "productivity" is a fraction. It has both a numerator and a denominator. The numerator is GDP. The denominator is hours of work. The result of this operation of division is called the quotient. Productivity is a quotient. A quotient is increased by either increasing the numerator or decreasing the denominator (or both).

There is an extensive literature on the systematic errors made by children learning rational number concepts. Those errors result from attempts to apply rules that have been previously learned about whole numbers to new situations where those rules are not relevant. Mistaking a quotient (productivity) for a numerator (output) would be an example of this kind of systematic error. Would it be asking too much for economists to set aside their indulgence in arcane mathiness and attend instead to the pervasive ignorance of fourth-grade rational number concepts that underlies the single-minded obsession with "economic growth"?

Wednesday, July 15, 2015

Matt Bruenig has a most excellent post, Why Jeb Bush is Wrong to Focus on Growth Alone at Policyshop. It isn't only Jeb Bush who focuses on growth "alone" (or above everything else). It's the standard framing, everything else is reduced to an afterthought.

In an ideal world, discussions of ideal work levels would be detached from discussions of unemployment, growth, and distribution. But in our narrow political frame, all of these things are mushed together, and tend towards the view that we must have more work hours to solve all the other stuff. This, of course, isn't true. You can reduce overall work hours (through longer vacations and more paid leave) while reducing unemployment, increasing GDP/hour, and even boosting the incomes of the poor and working classes (despite reducing work hours) by increasing transfer incomes. Yet, because of market income fetishism and simplistic discussions of GDP growth, we don't seem to have the political imagination to even consider such a program.

The public mood in Germany is one of outrage at Greece—their belief that Greeks think they have a permanent right to other people’s money, the dishonesty of the Greeks, the way they will promise anything in order to continue the same corrupt policies, their inability to follow the rules. Schäuble speaks for most of his countrymen when he says that Greece has no business being in the euro zone, but if it has to stay it must be kept on the tightest possible leash and given no relief from its obligation to pay as much as possible. Non-Germans may wonder where these attitudes come from. Is there some deep problem with German culture, a Teutonic meanness kept hidden since 1945 but now back in full view?

No. Most Germans are reasonable and are motivated by goodwill toward others, at least in the way that most people everywhere are. But they live in an information bubble which spawns a further echo chamber of public commentary, so the mental world they live in is simply different from the one outside their borders. (I don’t know first-hand, but there may be a similar bubble enveloping the Netherlands, Finland and a few other countries.) Inside this bubble there is a steady stream of “news” whose common denominator is that slippery, corrupt Greeks are scheming to take advantage of Germans’ hard-earned wealth. This is something that every German now “knows”, part of the conventional wisdom that forms the bedrock for political analysis.

To really understand how this works you would have to be there. It’s not a matter of one or two biased news reports, but a steady stream of news, every day, in little snippets and major headlines, that reinforce the underlying message. Here I’ll present a small example that, multiplied by a hundred, gives a sense of what’s going on.

So have you heard the latest? In order to prop up his political support Tsipras has made public transportation free in Athens! Can you believe it? Here’s a country that’s bankrupt, that’s sucking in our money to stay afloat, that should be spending every spare penny on the poverty of its own citizens, and instead it’s the same old clientelism: hand out favors, buy a few votes. That’s how he bought those “no” votes in the referendum. We have to pay for transportation in Frankfurt and Hamburg! Why should they demand our money so that their people can have something we don’t have? Hasn’t it occurred to them that transportation and everything else has to be paid for, that people need to work and produce so that society can afford it? But I guess that’s how it is with those Greeks.

Now tell me: have you heard anything at all about free transportation in Greece? No? It was a big story in Germany, written up in all the major papers and discussed on radio and TV. Here, for instance, is Handelsblatt, the main business newspaper:

The state coffers are empty in Athens, hundreds of thousands of pensioners are waiting for their pensions, but Premier Alexis Tsipras wants to keep people happy before the referendum on Sunday. After Tsipras on Tuesday introduced a zero tariff for public transport operators in Athens, on Wednesday the Greeks got a 50 percent discount on all tickets of the national railway company OTE. The discount is allegedly designed to facilitate people taking part in the referendum on Sunday.

(Handelsblatt, July 1)

In most of the world this was a non-story, unreported. One brief notice appeared in Straits Times, the respected English-language newspaper published in Singapore:

The Greek government has declared public transport free in Athens this week to ease difficulties created by the closure of the banks and a rush on petrol stations.Greece's transportation minister, Christos Spirtzis, has announced that buses, trams, trolley-buses, and the Athens metro will not require fares until next week.The offer is set to last until July 7, when in principle the banks will re-open.(Straits Times, July 1)

Outside of Germany, Greece was scrambling to keep the economy going in the teeth of an intense liquidity crisis set off when the ECB froze its support of the country’s banking system. Germans however saw another shameful case of clientelism and corruption at the expense of hardworking taxpayers in the rest of Europe. Now imagine this being repeated every day for months and you get some idea of the different mental world Germans inhabit.

(Incidentally, if I thought Tsipras was buying votes by giving Greeks benefits the country can’t afford, billing it to Europe, and then demanding that it all be wiped out in a future default, I’d be pretty angry too.)

If I’m sympathetic to the average German, it’s because, as an American, I’ve lived through the same thing. Replace “Greece” with “Saddam”, Iran, “the terrorists”, and so on, and you have plenty of information bubbles of our own. Remember the runup to the war in Iraq? Americans knew lots of things about Iraq’s connections to Al-Qaeda and its imminent threat to US security that made an invasion seem like a plausible solution. The fact that this looked like a collective mass hallucination from abroad had no effect on us. And Americans, despite their widespread support for military actions that can only be described as criminal, are not, for the most part, bad people. They want good things for themselves and others, and, given the information world they inhabited, their political views were not out of line.

Of course, information bubbles and the attitudes they lead to present a big problem. Wars of aggression are not OK, and neither are debtors prisons that lock up whole countries. To build a better world we will need to understand where the bubbles come from and how they can be perforated. Demonizing entire populations, however, is the wrong way to go.

In November 2013, Karlheinz Schreiber was sentenced by a German court to six and a half years for tax evasion. He was also involved in "inappropriate" transactions with former Canadian prime minister, Brian Mulroney. "Mulroney admitted taking $225,000 in cash from Schreiber, but said he broke no laws or ethical guidelines."

That's a lot of cash. "Broke no laws or ethical guidelines" doesn't pass the laugh test.

The nature of Schäuble's shady dealings with Schreiber have apparently never been fully disclosed, apart from his admission that he accepted the cash, which resulted in his resignation as leader of the CDU and Angela Merkel's elevation to that post.

In a new twist to the illicit funding scandal that has embroiled Germany's Christian Democrats, their leader, Wolfgang Schäuble, last night admitted he too had accepted cash from the arms dealer Karlheinz Schreiber for party funds.

The former chancellor Helmut Kohl is already under criminal investigation after admitting last year that he funnelled cash to the Christian Democrats (CDU) through a web of secret bank accounts. He has refused to name the donors, in contravention of German law.
According to a report to be published today in the newspaper Stuttgarter Zeitung, Mr Schäuble, who has always enjoyed a reputation for integrity, has been put "under massive pressure" by Mr Kohl to own up to his role in the irregular financing.

In an interview with the television channel ARD, Mr Schäuble said he took DM100,000 (£32,114) from the arms dealer which he had passed on to the party. He said that, unlike the money which Mr Kohl funnelled to the CDU, the cash he took did figure in the party's accounts but was reported under "miscellaneous income".
That would suggest that the handling of the donation contravened a law which calls for contributors who give more than DM20,000 to any political party to be identified.

Mr Schäuble, who became party chairman after Mr Kohl's crushing defeat in the 1998 election, was already under pressure to explain another mysterious - and apparently illicit - movement of funds.
Revised accounts released by the CDU at the end of last year showed that in January 1997, more than DM1m was sent by the parliamentary party to party headquarters in apparent defiance of a ban on such transfers. Mr Schäuble was leader of the parliamentary party at the time.

Meanwhile Kohl’s likely successor in the CDU, Wolfgang Schäuble, was becoming ever more enmeshed in the Schreiber scandal. At the time, Schäuble was one of the most popular politicians in the country and in 1997 Kohl had handpicked Schäuble to succeed him at the head of the CDU — but because the CDU lost the election in 1998, Schäuble became the party’s chairman.

When questioned in parliament in 1999 about whether he had accepted a donation during a meeting with Schreiber, Schäuble disputed the question. But in a radio interview in January, he admitted he had met Schreiber at least once more. That created suspicion that a second donation had been made. Whatever the case, indignation within the ranks of the CDU and its Bavarian sister party, the Christian Social Union (CSU) toward Schäuble grew so much that he was forced to resign.

So how exactly did Merkel profit from the Schreiber incident? The former party secretary became aware that, in the face of an unexpected question in parliament, Schäuble had lied about taking cash from Schreiber. Merkel realized at the time that this secret would eventually come out and would inevitably lead to Schäuble’s downfall. She also knew that, if she wasn’t careful, she could go down with him. After all, it was only logical that the general secretary of a party would have the confidence of the head of that party.

And so she wrote about it — in what was widely described as a “Dear John” letter addressed to Kohl and published in the Frankfurter Allgemeine Zeitung newspaper on Dec. 22, 1999. In the letter she was very critical of Kohl, saying that the new generation of politicians in the CDU needed to distance themselves from him, in the same way that teenagers must distance themselves from their parents if they are to become adults. Even though Merkel had only told Schäuble about plans to publish the open letter the night before, Kohl was convinced that the missive had been published with Schäuble’s foreknowledge and approval.

Suddenly Kohl seemed to discover his old political boisterousness, attacking Schäuble ever more vigorously. Perhaps he wanted to secure a virtuous place in the national history as the “father of German unity” — he had presided over the re-unification of East and West Germany — rather than the infamous politician with the dirty donations. A war of words, via various interviews, ensued, the likes of which had not been seen before. The fight between the two former friends and allies escalated to the point that Kohl abdicated his seat as honorary chairman of the CDU and Schäuble resigned his position with the words: “The CDU finds itself in the most serious crisis in its history.”

Despite the two-and-a-half year probe into the CDU's murky financial dealings, the chairman of the special parliamentary investigation committee said during the time that key questions in the affair still remained unanswered.

"A lot of untruths have been told in this committee, to put it mildly. I can also be more brutal and say: 'a lot of lies have been told,'" said Volker Neumann, a member of the center-left Social Democratic Party.

"For years, the CDU hasn't just breached party funding laws but it was also guilty of political corruption on several accounts under then Chancellor Kohl," Wolfgang Stroebele of the Green Party said.

The CDU denied allegations of corruption but the affair engulfed other leading lights of the party too. In early January, 2000, CDU chief Wolfgang Schaeuble, Kohl's handpicked successor, admitted he had received a payment of 100,000 deutschmarks from Schreiber.

Money being exchanged

But Schaeuble, Germany's current finance minister, insisted he had forwarded the money to the CDU's then treasurer, Brigitte Baumeister, and had nothing to do with the illegal booking of the money. Baumeister rejected the accusation, saying she had handed over the money to Schaeuble in an envelope.

The allegations were never proved in court but the affair cost Schaueble his job. He was replaced by Angela Merkel.

A political scandal

In many cases, the courts were unable to prove that CDU heavyweights were indeed involved in the affair. Proceedings against Helmut Kohl in a court in Bonn were stopped.

And authorities in Augsburg suffered a setback when Joerg Hillinger, the public prosecutor in an investigation of the CDU party in the state of Saxony was killed in a car accident in April 1999.

His death came shortly after investigations uncovered dubious dealings in the state party. Till today, it remains unclear whether his death was an accident or murder.

The CDU slush fund scandal has all the makings of a political affair. Till today, the names of the donors remain unknown and it remains unclear how many millions the party actually received in secret donations.

Investigators had hoped the arrest of former Deputy Defense Minister Holger Pfahls in July 2004 - after five years on the run - would shed more light on the affair. But that didn't happen.

Monday, July 13, 2015

Is it true, as we are now so frequently told, that Communist Russia’s economic "rate of growth" is faster than ours, or that we cannot survive unless we increase our own "rate of growth"? There are at least five main reasons why rate-of-growth comparisons are untrustworthy.

...

Let’s stop making a fetish of national income statistics and percentage rates of growth.

A calculation made by Fortune for the years since 1929 suggests that in the past quarter-century U. S. workers have been taking about 60 per cent of the productivity pie in the form of income, about 40 per cent as leisure. Assuming that the four-day week for non-agricultural employees will be attained when the total work week is in the vicinity of 32 hours, that productivity continues to increase at an average of 2 or 3 per cent a year, and that something on the order of the recent 60-40 ratio for income and leisure continues in effect, the 32-hour week should be spread throughout the whole non-farm economy in about 25 years.

Meanwhile, in the income-leisure choice for the years ahead, there will be one strong pressure for leisure: The workers who have been energetically pushing their way into the middle-income class have, naturally, become increasingly preoccupied with federal tax demands. "If we get more dough," said one AFL man recently, "the government can take back part of it. But they haven’t yet figured out a way to tax your day off."

In retrospect, the inability of the government to tax workers' days off may have been one strong pressure against leisure.

"Little snippets taken out of context can make anyone sound dumb." -- Kevin Drum, Mother Jones.

Kevin Drum thinks "It's Time to Cool It" on Jeb Bush's assertion that "people need to work longer hours." After all, Bush "quickly clarified" that he was talking about something totally different than what he said. Perhaps Mr. Drum would like to quickly clarify a dumb-sounding little snippet of his own with some ex post facto context? In a previous column on Bush's call for working longer hours, Drum pardoned Bush for a "confusing" reference to productivity:

It's true that Bush's use of "productivity" in the third sentence is a bit confusing because he's suddenly using it in its generic sense, not its formal economic sense, but that's no more than the slight clumsiness that's inevitable in live settings.

This is clearly wrong. There is no such thing as a "generic sense" of productivity. Furthermore, the formal economic sense of the word fits the context of Bush's statement better than would the alternative definition of productivity as the capacity to produce. Bush said, "people need to work longer hours and, through their productivity, gain more income for their families."

Bush was talking about growth -- economic growth defined as an increase in the GDP -- and hours of work. Productivity refers to a ratio between output, in the form of GDP, and inputs in the form of hours of work. If Bush had a different meaning of productivity in mind, it could as easily have been the misconception that productivity is simply a synonym for output.

What Drum is asking us to do is credit Bush for the keen insight of his retroactive clarification and at the same time give him a break on the grounds his original statement was clumsier than it appeared. Somehow Bush comes out ahead on two counts for being both smarter and dumber than he sounds.

The worst thing about Drum's apologetics is that Governor Bush is not the real problem here. The real problem is a feeble public discourse about economics in which terms like "growth," "productivity" and "hard work" are tossed around as vague euphemisms that have no definitive meaning. Bush was merely reciting a stock jumble of empty platitudes. It was the incongruity of a particularly odd arrangement of those platitudes, whether intended or not, that struck a nerve. Drum urges us to set aside the reflex of incredulity and get on with the droning monotone of platitudes -- the real business of political punditry.

This is a teachable moment. I don't see any point to "cooling it." Here's why:

First, there is the matter of the disconnect between productivity gains and income that Alan Pike mentioned at Think Progress. If greater productivity hasn't been translating into higher income for decades, why should we assume it will magically do so in the future? Regardless of whether Jeb Bush meant what he didn't say or said what he didn't mean, we should be having an intense public conversation about the disconnect between productivity gains and median incomes.

Second, and more germane to the sense in which Bush may have been misusing the term productivity, both output and productivity are weak links in the logical chain between longer hours and more income. Longer hours don't necessarily translate into increased output and increased output doesn't necessarily translate into improved productivity.

Under current conditions in the U.S. it is very likely that those links have been broken. According to a Gallop poll from last August, full-time workers in the U.S. worked an average of 47 hours a week. The Bureau of Labor Statistics gives an average of 42.5 hours a week for full-time workers. This number, however, averages in the hours of workers who usually work full time but who worked less than 35 hours in the reference week due to non-economic reasons, such as illness or family obligations. So the average hours of people who usually work full time and who actually did the week they were surveyed would be more than 42.5. For the sake of argument, let's say that full-time workers average 44 hours of work a week.

If we assume that a 40-hour workweek is optimal for total output then those extra four hours a week are not only going to significantly depress productivity but also would lower total output by a small amount. The latter conclusion follows tautologically from the assumption. What is perhaps less intuitively obvious is that even if we assume that a 44-hour workweek is optimal for total output, hourly productivity would be significantly lower under a 44-hour workweek than it would be under a 40-hour workweek. I estimate around 9% higher productivity for the 40-hour week.

One of the pioneers of national income accounting, Edward Denison, estimated in the early 1960s that as much as 10 percent of economic growth between 1909 and 1957 could be attributed to "the effect of shorter hours on the quality of a man-hour's work." During that half-century, average annual hours of work per worker declined by about 30% while total economic output nearly tripled.

This is not to say that economic output would have necessarily been less if annual hours of work had not declined as much as they did -- only that more of the output would have been attributable to long hours of work rather than increased quality of work. Workers would have received less income for more hours of work. Therein lies the cost-benefit riddle that the euphemistic false equivalence of growth, wages, productivity and hard work doesn't solve. Productivity is not simply about how much output there is but how much output relative to effort. Way back in 1929. Lionel Robbins wrote, prematurely:

The days are gone when it was necessary to combat the naïve assumption that the connection between hours and output is one of direct variation, that it is necessarily true that a lengthening of the working day increases output and a curtailment diminishes it.

Unfortunately, those days are not gone. Instead the "naïve assumption" has triumphed over economic analysis of the hours of work and the public conversation has retreated to the glibly vicious "magazine of untruth" refuted nearly 150 years ago.

Starbucks CEO Howard Schulz headlined a 17-firm event that promised more jobs for young people over the coming years. The employment numbers are mainly for PR purposes, so I won’t bother with them. The bigger problem, though, is that working as a barista or an order taker at Taco Bell (another participant) normally doesn’t lead to any next step. Career ladders that used to reach from entry level positions to middle class careers hardly exist in America any more. If getting the first job is a problem (which it is for millions), getting the second isn’t much easier.

If a company like Starbucks really wanted to make a dent in the problem and demonstrate how the bottom end of the labor market can be lifted up, here’s something they could do:

Create an internship program. Same workers, same responsibilities, same pay (or a little more), but a new wrinkle: provide a learning component to the work performed by young workers willing to enroll in an expanded program. These workers could meet one day a week at a separate location, where they would study how the company organizes the work flow, manages employees, and deals with its customers. This could be combined with more theoretical considerations—theories of process management, motivation, inventory management, quality control, marketing and so on—but in the context of their current work. At the end, after a half year or so, they could receive a certificate documenting their accomplishments. One could also envision a second level: once workers had familiarized themselves with the ins and outs of the operations, they could take on a project, like solving a nagging problem or envisioning a different work structure or strategy.

Clearly a program like this would benefit from academic partners, perhaps local community colleges or even universities. Models for extended education for managers, where companies pay for their employees to take evening or weekend workshops at nearby campuses, are widespread; the proposal I’m making would ask Starbucks and other companies to pay for similar opportunities for their frontline workers.

The goal is to make an entry-level job a true starting point for workers who want to escape minimum wage work. In a better world the government would take the lead, and unions would also play a key role. As far as the US is concerned, that’s obviously a long time ago in a galaxy far, far away. But if Starbucks or other companies want to help workers gain a toehold on a better life in spite of the minimal learning and advancement opportunities built into their entry-level jobs, this would be a step in the right direction.

Sunday, July 12, 2015

Back in the mid-70s when Saud bin Faisal bin Abdulaziz al-Saud (aka "Saud al Faisal") became Foreign Minister of Saudi Arabia, finally only stepping down this past April, I thought that he resembled the famous Arab actor, Omar Sharif. As time went on, their appearances seemed to diverge, with Saud coming more and more to resemble his late father, King Faisal. Whatever one thinks of the views or policies of the late Saud al Faisal, he was probably the wisest and most capable member of the Saudi royal family, and when he stepped aside three months ago, had been serving as Foreign Minister far longer than anyone else in the world.
So, the curious coincidence is that they have just died within a day of each other, Saud on July 9 at age 75, and Sharif on July 10 at 83. I learned from Juan Cole that Sharif was originally born in Lebanon of Christian parents with a very different name, but converted to Islam in the 50s when he was the top film star in Cairo and married his leading costar, who was Muslim. They never divorced, although separated. I had always read that he was Egyptian. Cole also points out that today it would be all but impossible for a Muslim Arab actor to play a Jewish part as he did in Funny Girl, much less a part such as Doctor Zhivago. He certainly was a fine actor.
Barkley Rosser

Friday, July 10, 2015

Historically, the benefits from higher productivity are higher pay and more leisure – if we go back a century, for instance, work weeks of 60 or even 70 hours a week were common. But while the American work week has been largely fixed at 40 hours a week for the last 70 years, other countries have pursued policies to shorten the work week and/or work year through paid sick days, paid family leave, and paid vacation.

Several European countries have actively pushed policies of work sharing as an alternative to unemployment: the government compensates workers, in part, for a reduction in hours rather than paying unemployment insurance to someone who has lost their job. Germany has led the way in pushing work sharing policies, which is an important factor in its 4.7% unemployment rate. And, as a result of work sharing and other policies, the average worker in Germany puts in almost 25% fewer hours each year than workers in the United States, according to the OECD. Most other wealthy countries are similar to Germany: in the Netherlands, the average work year is 21% shorter than in the US and, in Denmark, it is 20% shorter.

But that back-and-forth over the “work longer hours” line misses the bigger, subtler error in Bush’s diagnosis of the economy’s present underachiever status.

Bush claimed that if workers were able to get scheduled for more hours, they would “through their productivity gain more income for their families.” Obviously more hours would equal a larger paycheck. But Bush’s suggestion that being more productive will produce individual prosperity for American workers in the 21st century is flat wrong.

The relationship between American workers’ industriousness and their economic security has eroded so severely in recent decades that the two concepts aren’t even on speaking terms these days.

It's great to see Dean Baker and Alan Pike raising important issues about the relationships between working time, productivity and wages. It would be fantastic if the conversation broadens and deepens to embrace the historical theory and analysis of working time. Back in December, I posted the abstract of a [still] forthcoming Economic Journal article by John Pencavel, "The Productivity of Working Hours." Here it is again:

ABSTRACT: Observations on munition workers, most of them women, are organised to examine the relationship between their output and their working hours. The relationship is non-linear: below an hour’s threshold, output is proportional to hours; above a threshold, output rises at a decreasing rate as hours increase. Implications of this finding for the estimation of labour supply functions are considered. The findings also link up with the current research on the effects of long working hours on accidents and injuries.

In the conclusion to his article, Pencavel cited the "neglect in contemporary models of labor markets" of the question of the variability of "the link between working hours and work effort or fatigue..." Addressing this theme, I sent the following email to Professor Pencavel, which I think well sums up my puzzlement and consternation at the paradigmatic incongruity of that neglect:

Dear Professor Pencavel,

I was delighted to hear about and read your working paper and forthcoming article on the productivity of working hours. May I suggest a few further historical connections you may find of interest?

In 1913, the British Association for the Advancement of Science established a committee to investigate "the question of fatigue from the economic standpoint." This committee presented its first interim report at the annual meeting of the Association in Manchester in September, 1915, the same month that the Health of Munitions Workers Committee was established. Philip Sargant Florence was investigator for the British Association committee. Florence later wrote Economics of Fatigue and Unrest (1924). Also on the committee was Sydney Chapman, whose 1909 presidential address to the economics section of the British Association, "Hours of Labour" was subsequently published in the Economic Journal and was deemed authoritative by Marshall, Pigou, Robbins and Hicks.

In The Theory of Wages, Hicks devoted six pages to a summary of Chapman's theory of hours, which he described as the “classical statement of the theory of 'hours' in a free market.” Hicks was paraphrasing Chapman's analysis when he explained "why competition among firms might not induce a cut in hours and why, in the absence of statutory regulation or the activities of trade unions, employers have been 'slow' to initiate a reduction in hours." Pigou also presented an extensive summary of Chapman's theory in his Economics of Welfare, although his attribution of the theory to Chapman was somewhat less than explicit.

Chris Nyland emphasized the importance of Chapman's theory and its curious omission from contemporary neoclassical discourse in his chapter on the history of worktime thought in Reduced Worktime and the Management of Production (1989). Peter Groenewegen has a chapter on Chapman in The Minor Marshallians and Alfred Marshall: An Evaluation (2012).

Chapman also collaborated with Thomas Brassey on a three-volume "continuation" of Brassey's Work and Wages. The evidence in Brassey's original Work and Wages, published in 1872, played a strategic role in the demise of classical political economy and its eventual displacement by marginalist analysis. Brassey's father was a railroad builder who employed tens of thousands of laborers throughout Europe and the British Empire. The younger Brassey relied on his father's extensive labor accounting records to show that higher wages didn't translate into higher labor costs and that long hours didn't necessarily result in more output. The prominent American economist, Francis Amasa Walker, extolled the influence of Brassey's evidence:

[B]y far the most important body of evidence on the varying efficiency of labor is contained in the treatise of Mr. Thomas Brassey, M.P., entitled Work and Wages, published in 1872. Mr. Brassey's father was perhaps the greatest "captain of industry" the world has ever seen… The chief value of Mr. Brassey, Jr.'s work is derived from his possession of the full and authentic labor-accounts of his father's transactions....

Subsequently, in what came to be "regarded to be the first modern economic textbook," Alfred Marshall credited Walker for "forcing constantly more and more attention to the fact that highly paid labour is generally efficient and therefore not dear labour…" Marshall judged that fact to be "more full of hope for the future of the human race than any other… [although it] will be found to exercise a very complicating influence on the theory of Distribution." In addition to his argument that wages rates didn't predict labor costs, Brassey also affirmed that it was "equally true that the hours of work are no criterion of the amount of work performed."

Chapman was a highly regarded Marshall protege. Thus Work and Wages, in Continuation... completed an arc from Brassey to Walker to Marshall to Chapman and, finally, back to Brassey. In volume 3 of Chapman's "Continuation" (1914), he reprised his own theoretical analysis of the hours of labor that had been published five years earlier and which was consistent with the evidence and conclusion that Brassey had offered in his 1872 book.

In the conclusion to your article, you mention the apparent "neglect in contemporary models of labor markets" of the variability of "the link between working hours and work effort or fatigue..." This neglect becomes more perplexing in light of the role that Brassey's contribution played in the emergence of neoclassical analysis and of the former prominent regard for Chapman's theory of the hours of labor, at least among leading British economists. I've written about Chapman's theory and its undeserved eclipse in several articles and have appended links to two of them below.

A third piece listed below, my chapter in Toward a Good Society in the Twenty-First Century, "Time on the Ledger: Social Accounting for the Good Society," projects from Chapman's theory and from historical trends in working time what might today be an "optimal" average working year in the U.S. My projection is, necessarily, highly speculative but is intended to provoke more systematic attention to the issue addressed by Denison in the quote with which you concluded your article.

Thursday, July 9, 2015

The steno-pool commentariat doesn't seem to have noticed yet that poor ex-Governor Bush, trying to crawl out of one embarrassment, couldn't resist taking a jab at those notorious scroungers, people who work 30 hours a week instead of 40 (or 47) and thus are consigned to "getting in line and being dependent of government."

Govnah Bush doesn't have to get in line. Why, his clients get in line to pay him 7.3 million dollars (in 2013) to listen to his evident wisdom.

But he later clarified the comment, moving quickly to quell a fresh assault by Democrats eager to characterize the Republican presidential front-runner as out of touch.

Not so fast, Bush told reporters as he clarified his comments after a town hall meeting at a Veterans of Foreign Wars hall here.

"If we’re going to grow the economy people need to stop being part-time workers, they need to be having access to greater opportunities to work," he told reporters.

"You can take it out of context all you want, but high-sustained growth means that people work 40 hours rather than 30 hours and that by our success, they have money, disposable income for their families to decide how they want to spend it rather than getting in line and being dependent on government," Bush said. [Sotto voce:note the reflex kick at people working "only" 30 hours a week as scroungers "getting in line and being dependent of government."]

Bush wasn't actually explaining his earlier statement. He was reinterpreting the statement, "people need to work longer hours," to mean something entirely different than "people need to work longer hours." "Working longer hours" and "having access to greater opportunities to work" are not equivalents.

Jeb Bush "at work"

One way to increase opportunities for involuntary part-time workers to work more hours is for those who are working 47 hours a week or over 50 hours a week to be working shorter hours. Heaven forbid! According to an August 2014 Gallup Poll, full time workers in the U.S. reported working an average of 47 hours a week, with 39% of full-time workers claiming to work over 50 hours a week -- almost as many as the 42% who say they work an FLSA standard 40-hour week.

I would take those figures with a tablespoon of salt. People lie about how hard they work. They think saying they work incredibly long hours makes them appear better than everybody else. Actually, it makes them look unproductive. Nevertheless, the Gallup results have held steady for the last 14 years at close to those numbers. If people are padding their hours for the pollsters, they are at least consistent about it.

If those superfluous seven hours per week were "lumps of labor" they could readily be redistributed to involuntary part-time workers and the unemployed eliminating both unemployment and underemployment! But of course, there is not "a fixed amount of work to be done" and the mere fact of redistributing work opportunities would increase productivity and output thus exacerbating the problem of insufficient demand unless that redistribution of hours was accompanied by a substantial redistribution of income in the form of higher wages.

Well, now you see why Jeb Bush was calling for longer hours rather than shorter hours. Longer hours means less pressure for wage increases. Wouldn't want that. Heck of a job, Jebbie!

The culture of jihad is a culture of romance. It promises adventure and asserts that the codes of medieval heroism and chivalry are still relevant. Having renounced their nationalities, the militants must invent an identity of their own. They are eager to convince themselves that this identity is not really new but extremely old. The knights of jihad style themselves as the only true Muslims, and, while they may be tilting at windmills, the romance seems to be working. ISIS recruits do not imagine they are emigrating to a dusty borderland between two disintegrating states but to a caliphate with more than a millennium of history.

One might paraphrase, "The cult of confederacy is a cult of romance. It promises adventure and asserts that the codes of ante-bellum heroism and chivalry are still relevant..." Notable in these anachronistic fantasies is that the recruits imagine themselves to be medieval knights, Southern gentlemen. In other words, the transit back in time also represents a profound elevation in social class.

"Gosh, if only I had been born a thousand years ago, surely I would have been king!" Obviously the recruits to these anachronistic reenactments have a deficient understanding of probability and statistics. They wouldn't have been knights or gentlemen, they would have been peons. They wouldn't have been writing (or reading) poetry and brandishing swords. They would have been illiterate, wielding a hoe.

People should be careful what they wish for. Especially when it's nostalgia.

I don’t think we should let this pass. Jens Weidmann, Germany’s representative on the governing council of the ECB and considered by most Germans (and their media) as a paragon of economic and financial wisdom, is quoted as saying, “Central banks, although they have the means, have no mandate, in my view, to safeguard the solvency of banks and governments.” Note that he refers to central banks in general and not only the ECB.

Frankly, I think Weidmann should sue the reporter who put these words into his mouth—obviously a crude attempt to make him sound like a yahoo who doesn’t know the first thing about his line of work.

Wednesday, July 8, 2015

"My aspiration for the country and I believe we can achieve it, is 4 percent growth as far as the eye can see. Which means we have to be a lot more productive, workforce participation has to rise from its all-time modern lows. It means that people need to work longer hours and, through their productivity, gain more income for their families. That's the only way we're going to get out of this rut that we're in."

Tuesday, July 7, 2015

The CSI300 index slumped more than 7% at the open and was down 4.8% at 3,739.18 points by 2.08am GMT.

The Shanghai Composite Index dropped 8% and was down 4.7% at 3,551.13 points by mid-morning.

China stock futures pointed to further losses.

Losses on the mainland also weighed heavily on Hong Kong shares, with the Hang Seng Index down 3.3% and shares of Chinese companies listed in the city falling 4.2%.

As the markets opened, only 11% of companies on the two key mainland markets were still trading.

Christopher Balding, a professor of economics at Peking University said that while it was not possible to know exactly why so many companies had suspended trading, a large number were doing so because they had used their own stock as collateral for loans and they want to “lock in the value for the collateral”.

“Today is all about China, with Greece in the background now that it’s been given a new deadline,” said Ayako Sera, a senior market economist at Sumitomo Mitsui Trust Bank in Tokyo.

“Shanghai’s early losses were like a cliff-dive, which had a huge impact on investor sentiment.”

“1. In the stock of phraseology that lays bare the amalgam of stupidity and cowardice constituting the mode of life of the German bourgeois, the locution referring to the impending catastrophe — that “things can’t go on like this” — is particularly noteworthy. The helpless fixation on notions of security and property deriving from past decades keeps the average citizen from perceiving the quite remarkable stabilities of an entirely new kind that underlie the present situation….”

“14. The earliest customs of peoples seem to send us a warning that in accepting what we receive so abundantly from nature we should guard against a gesture of avarice. For we are able to make Mother Earth no gift of our own. It is therefore fitting to show respect in taking, by returning a part of all we receive before laying hands on our share. This respect is expressed in the ancient custom of the libation. Indeed, it is perhaps this immemorial practice that has survived, transformed, in the prohibition on gathering forgotten ears of corn or fallen grapes, these reverting to the soil or to the ancestral dispensers of blessings. An Athenian custom forbade the picking up of crumbs at the table, since they belonged to the heroes. If society has so degenerated through necessity and greed that it can now receive the gifts of nature only rapaciously, that it snatches the fruit unripe from the trees in order to sell it most profitably, and is compelled to empty each dish in its determination to have enough, the earth will be impoverished and the land yield bad harvests”

The issue of austerity versus stimulus is often framed as the entire debate – if you don’t support one, you must support the other, because there are no alternatives. This is the same binary debate that has been going on for more than 100 years between the state versus the market. Yet, these dichotomies distract people from thinking about what’s really important – the goal of these policies, which is to grow the economy.

No analysis I’ve read thus far has questioned the damaging role that the endless quest for economic growth plays. Neither austerity nor government stimulus will ever be able to address the debt crises and recessions of the twenty-first century because what we’re dealing with here is an inherent contradiction of capitalism.

Monday, July 6, 2015

According to commentator after commentator, especially on lots of blogs, that is certainlhy the case. Those nasty, lazy, corrupt, good-for-nothing Greeks just want to have it all as shown in the horrible irrational and irresponsible No vote on their referendum, having been doing nothing but running primary budget deficits and demanding bailouts from their troika creditors, who have been offering them highly reasonable deals that they should just shut up and accept or else have their government step down and be replaced by an appropriatedly kowtowing responsible one. Among those pushing the line that they have been running nothing but primary budget deficits has been Tyler Cowen at Marginal Revolution, most recently posting a link to a Ricardo Hausmann Faecbook post that states "It has been running primary deficits..." with no modification, with Tyler, having made such a claim earlier and being told that he was misrepresenting things thinking that this post would somehow vindicate his inaccurate position.

So, of course there is a lot of confusion and we cannot know for sure what is going on, but in fact official data is in on the budgetary situation of Greece during the first quarter of 2015 during which the Syriza government was in power, supposedly irresponsibly running massive primary deficits and otherwise showing why they should be removed from power, the awful commies. But, whoooops! if one looks at the official data, it turns out that not only did the government run a primary surplus during the first quarter, but that this surplus increased from about 770 million euros in the last quarter of 2014 to about 1.19 billion euros in the first quarter of 2015, a more than 400 million euro increase in that supposedly nonexistent primary surplus, as reported by phantis just yesterday, (actually April 2) although there have been earlier reports coming in with roughly similar numbers, with little of this getting much media or other attention anywhere.

Now it must be admitted that this outcome includes some one-off elements unlikely to continue. There is also the unfortunate fact that the Greek economy has fallen back into a recession, which is likely to worsen in the near future. So, tax revenuse are likely to fall, and it may be as Tyler Cowen stated in an earlier post that "the primary surplus is gone." But at least one report I found made a projection for the second quarter (actual numbers not in yet for that quarter just ended) that showed a primary surplus still holding in the second quarter and even into June, although much reduced from the first quarter. I would note that one item people have pointed to has been an incentives program the government put in place to encourage those in arrears on paying past taxes to come in out of the cold, a one-shot deal. Best estimate I saw of that amount for first quarter was 147 million euros, helplful, but less than half of the increase in the primary deficit from the previous quarter, with reduced spending responsible for more of it, despite all the caterwauling to the contrary by so many very self-righteouss outside critics. As it is, while those making those tax arrears payments not returning to do so again, the incentives program remains in place, so there may still be more arreared taxpayers coming in from the cold in the future.

Greece may well have gone into primary budget deficit territory by now (or shortly will do so), but those claiming that it has been just running primary deficits all along are misinformed and misinforming when they repeat this falsehood. They should all go check the actual data before repeating this drivel further agains.